Pound Volatile amid Dovish BoE Rate Hike, US Dollar Rocked by Muddled Labour Data

GBP/EUR Exchange Rate: Pound Volatile Following BoE’s Dovish Hike

Trade in the Pound Euro (GBP/EUR) exchange rate was volatile over the past week, following a dovish interest rate hike from the Bank of England (BoE).

While the BoE hiked rates by 25bps, in line with market expectations, the accompanying forward guidance was dovish. However, BoE Governor Andrew Bailey quickly walked back these losses with hawkish comments in his accompanying press conference.

An increasingly downbeat UK economic outlook has since placed fresh pressure on the Pound.

GBP investors will now turn their focus to Friday’s GDP data. Economists anticipate growth will have stalled in Q2 on a quarterly basis, which could spark recession anxieties and weaken GBP.

GBP/USD Exchange Rate: Pound Seesaws amid Limited Data

The Pound US Dollar (GBP/USD) exchange rate seesawed over the last week, as an intermittent data calendar kept GBP in flux.

On top of the dovish BoE hike, Sterling has been vulnerable to a deteriorating outlook for the UK economy. GBP exchange rates were also dented by downbeat UK retail data, which signalled that the vital sector was continuing to struggle.

Elsewhere, a wavering market mood brought the Pound additional headwinds, due to its increasingly risk-sensitive nature.

Looking past Friday’s GDP figures, next week will see the publication of the UK’s latest employment and inflation figures. Will these weaken BoE rate hike expectations and pile more pressure on Sterling?

USD/GBP Exchange Rate: US Dollar Mixed amid Muddled Labour Data

The US Dollar Pound (USD/GBP) exchange rate strengthened over the past seven days, despite fluctuations brought about by mixed data.

Initially, ADP employment data smashed forecasts, amping up bets on additional tightening from the Federal Reserve. However, this was swiftly undermined by the latest non farm payrolls data, which disappointed and cut down USD.

Safe-haven flows subsequently revived the US Dollar, but dovish comments from Fed officials tempered these gains. Officials have begun to discuss the possibility of a pause, leading USD investors to pare rate hike bets.

Tomorrow, the US Dollar could rally if July’s consumer price index data rises in line with forecasts. Despite recent Fed speeches, a rise in headline inflation could spark bets on at least one last hike, boosting USD.

EUR/USD Exchange Rate: Euro Undermined by Reduced ECB Bets

The Euro US Dollar (EUR/USD) exchange rate traded in a wide range over the past week, as investors adjusted their bets on further tightening from the European Central Bank (ECB).

Initially, the common currency began to weaken as PPI cooled, which led EUR investors to reduce their rate hike bets. Mixed economic data further muddied the waters, with a sharper-than-forecast contraction in retail sales over June indicating weakening consumer resilience.

A light data calendar further tempered the single currency, leaving it vulnerable to its negative correlation against the US Dollar.

Looking ahead, the ZEW economic sentiment index for Germany is scheduled for release next week. Another deterioration in morale could lead the Euro to weaken.

John Mulcahey

Contact John Mulcahey

Do Not Sell My Personal Information